ex Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. In a competitive market free of government regulation, a. price adjusts until quantity demanded is greater than quantity supplied. b. price adjusts until quantity demanded is less than quantity supplied. c. price adjusts until quantity demanded equals quantity supplied. d. supply adjusts to meet demand at every price. ____ 2. A legal maximum on the price at which a good can be sold is called a price a. floor. b. subsidy. c. support. d. ceiling. ____ 3. A price ceiling is a. often imposed on markets in which “cutthroat competition” would prevail without a price ceiling. b. a legal maximum on the price at which a good can be sold. c. often imposed when sellers of a good are successful in their attempts to convince the government that the market outcome is unfair without a price ceiling. d. All of the above are correct. ____ 4. If a price ceiling is not binding, then a. the equilibrium price is above the price ceiling. b. the equilibrium price is below the price ceiling. c. it has no legal enforcement mechanism. d. More than one of the above is correct. ____ 5. If a price ceiling is not binding, then a. there will be a surplus in the market. b. there will be a shortage in the market. c. the market will be less efficient than it would be without the price ceiling. d. there will be no effect on the market price or quantity sold. ____ 6. A price ceiling is binding when it is set a. above the equilibrium price, causing a shortage. b. above the equilibrium price, causing a surplus. c. below the equilibrium price, causing a shortage. d. below the equilibrium price, causing a surplus. ____ 7. Which of the following observations would be consistent with the imposition of a binding price ceiling on a market? a. A smaller quantity of the good is bought and sold after the price ceiling becomes effective. b. A smaller quantity of the good is demanded after the price ceiling becomes effective. c. A larger quantity of the good is supplied after the price ceiling becomes effective. d. All of the above are correct. ____ 8. Suppose the equilibrium price of a physical examination ("physical") by a doctor is $200, and the government imposes a price ceiling of $150 per physical. As a result of the price ceiling,
a. the demand curve for physicals shifts to the right. b. the supply curve for physicals shifts to the left. c. the quantity demanded of physicals increases and the quantity supplied of physicals decreases. d. the number of physicals performed stays the same. ____ 9. Suppose the government has imposed a price ceiling on cellular phones. Which of the following events could transform the price ceiling from one that is binding to one that is not binding? a.
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